BAM Key Details:
- With the SVB collapse taking place a week ago, mortgage rates dropped from a four-month high of 7% to around 6.5% for 30-year fixed rates.
- Because of this, mortgage demand increased by 6.5% week-over-week.
With Lower Rates, Comes an Increase in Mortgage Demand
The Mortgage Bankers Association reported a 6.5% increase in mortgage applications for the week ending March 10 compared to one week earlier. And Redfin’s mortgage lending company, Bay Equity, experienced a surge in rate lock-ins on March 10, indicating a willingness among buyers to seize the opportunity presented by falling rates.
Buyers pounced when rates fell because they’re so volatile right now, which shows that there are plenty of people waiting in the wings for the right time to enter the market.
Despite this, uncertainty remains, with plenty of buyers continuing to hold out. Although mortgage demand increased week-over-week, it’s down from the same time period last year, primarily due to housing affordability issues.
Near-peak home prices, coupled with mortgage rates above 6%, put the typical monthly mortgage payment at $2,556, a mere $7 less than their all-time high of $2,563, according to a new Redfin report. As a result, many potential buyers are still deterred from entering the market.
What will rates do next?
It’s the question everybody is asking, but nobody knows the answer to.
While we can’t predict what will happen to mortgage rates, the industry will gain some insights based on how next week’s Fed meeting pans out.
Where mortgage rates go from here largely depends on how the Fed reacts to chaos in the banking industry in the U.S. and abroad, alongside stubbornly high inflation. The Fed’s goal at its meeting next week is to achieve a balancing act: Fight inflation while keeping the banking system intact. Even though the European Central Bank hiked interest rates more than expected this morning, it’s unlikely the Fed will follow suit. Instead, we expect them to either raise rates modestly or press pause for the time being, the latter of which would send mortgage rates down and bring back many sidelined buyers and sellers.
As an advisor to your clients, it’s your job to present that data as it exists today and help buyers and sellers sort through their options.
There’s no doubt it’s a challenging time in real estate, but with the right guidance and a clear understanding of the local market, you can help everyone you work with make informed decisions.